MSCI Review: Pakistan maintains its shrinking presence in the EM index

November 8, 2019 (MLN): Morgan Stanley Capital International (MSCI) recently held its Semi-Annual Index Review for MSCI Equity Indexes, wherein Pakistan retained its position in the MSCI Emerging Market Index, thus meeting market expectations.

While a number of countries saw several additions and deletions in their Global Standard Index, this was not the case with Pakistan as it witnessed neither any addition nor deletion. However, three renowned Pakistani companies, i.e. KAPCO, DGKC, and THAL, were ousted from the Global Small Cap Index, whereas no additions were made to it.

According to a research article by Foundation Securities, China A-shares will see an increase in their weightage of Emerging Market Index, from 2.5% to 4.1%, as part of MSCI’s announcement made previously in this regard. As a result of this modification, Pakistan’s weight in MSCI EM might reduce further.

Currently, the MSCI EM for Pakistan comprises of HBL, OGDC and MCB, each having a weightage of 0.1%. This brings Pakistan’s existing weightage to approximately 0.031%, as per a research report by Al Habib Capital Markets.

Another major impact of the aforesaid changes would be that foreign passive funds might divest their investments from KAPCO, DGKC, and THAL, now that these companies are no longer a part of the Small Cap Index.

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